Environmental Issues
The developing regulatory framework addressing climate change and other environmental items will have a significant impact on the aviation sector and the community it serves. The provision of finance to enable the world's airlines to acquire and use modern aircraft and engines with advanced environmental technologies is a critical part of the aviation sector.

Among the wide-range of considerations to be taken into account in developing that regulatory framework, therefore, is its impact on the global aviation finance community that will be called upon to finance lower-emissions technology aircraft.

The AWG supports in principle a global approach to environmental policy and regulation impacting the aviation sector, developed under the auspices of the International Civil Aviation Organisation.

Emissions trading is one policy option to reduce aviation's role in controlling climate change. There are other policy options to be considered, including, most notably, those focused on operational efficiency (improvements to air traffic management and integrated airport management systems), next generation biofuels, and the development of alternative technologies.

The AWG has developed a statement of principles on the impact of environmental regulation.

Global Approach to Environmental Policy and Regulation on Aviation

The AWG supports in principle a global approach to environmental policy and regulation impacting the aviation sector, developed under the auspices of the International Civil Aviation Organisation. We are encouraged by the Resolutions agreed at the most recent ICAO 37th Assembly (8 October 2010), including its call for improving efficiency, capping omissions, and a global CO2 standard.

AWG notes the part of that Resolution calling for the development of a global framework on market based (economic) measures by the next ICAO Assembly (2013) based on principles designed to minimise market distortions, safeguard fair treatment of aviation relative to other sectors, and ensure that aviation emissions are accounted for only once.

The reasons for our support for such a global approach are summarised as follows. First, the issue of climate change is a global one, as are its causes. Second, air transport is a key driver of global integration and its regulation, unless global, can have undesirable and unforeseen consequences. Third, aviation emissions do not recognise national borders. Fourth, a significant portion of aviation emissions is released in international airspace. Fifth, aviation's contribution to global warming should be considered holistically, rather then piecemeal, and relative to the contribution of other sources of greenhouse gases. That will enable proportionate policies to be adopted. Sixth, the environmental impacts of aviation have traditionally been regulated at the global level by ICAO. Seventh, the existing law in this area, specifically tasks ICAO with addressing the issues of international aviation emissions. Eighth, regional approaches may impede agreement on an international solution. Ninth, regional approaches may precipitate trade disagreements or protracted litigation, if extra-territoriality is challenged. Tenth, regional approaches may produce conflicting or inconsistent regulation. That would be highly inefficient, both as regards the practicalities of airline operations and the design and manufacturing of aircraft and engines and may ultimately undermine the regulatory objectives.


AWG commented on, and is now monitoring the challenges to and implementation of, the European Emission Trading Scheme.

AWG is concerned by any attempt to secure an operator's obligations under the EU ETS by liens against leased or financed aircraft. AWG has prepared a position paper on this matter.

The first example of a potential issue of this type was seen in connection with the United Kingdom's implementation of the EU ETS, since it applied aspects of the UK's Fleet Lien in this context. The AWG responded with papers that set forth its objections to rights of detention and sale of third party owned or financed aircraft.

While the final UK implementing regulation, imposes such liens (for non-compliance by an operator with emissions, monitoring, and reporting requirements), an aircraft must be released if the defaulting operator airline is no longer entitled to possession of the aircraft.